Review of student support arrangements in other countries - Gov.UK

186 Pages·2010·3.03 MB·English

BIS RESEARCH PAPER NUMBER 10
Review of Student Support
Arrangements in Other Countries
SEPTEMBER 2010
ReviewofStudentSupportArrangementsinOtherCountries
TheReview of Student Support Arrangements in
Other Countries was conducted by London
Economics on behalf of the Department for
Business, Innovation and Skills
Departmentfor Business, Innovation and Skills
1 Victoria Street
London SW1H 0ET
www.bis.gov.uk
BIS ResearchPaper number 10
September 2010
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Contents
Glossary 5
Executive Summary 7
1 Introduction andTerms of Reference 10
1.1 Introduction and background 10
1.2 Objectives of theresearch 11
2 Approach andmethodology 13
2.1 Factual reviewof national student support arrangements 13
3 Literaturereview: Tuitionfees, student support arrangements andparticipation 17
3.1 Elements of student support systems 17
3.2 Returns toqualifications 20
3.3 Tuitionfees and participation 24
3.4 Student support andparticipation 27
3.5 Summary of evidence 32
4 Summary descriptionof differences in student support arrangements 35
4.1 Introduction 35
4.2 Group-wise comparative analysis of student support arrangements 36
5 Detailed description of student support arrangements in each country 61
5.1 Baseline: England 61
5.2 Scotland 68
5.3 Wales 72
5.4 NorthernIreland 76
5.5 Australia (Federal level) 80
5.6 Canada (Federallevel) 90
5.7 Denmark 97
5.8 France 104
5.9 Germany (Federal level) 111
5.10 Hungary 119
5.11 Ireland 124
5.12 Netherlands 129
5.13 NewZealand 137
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5.14 Norway 145
5.15 Spain 152
5.16 Sweden 161
5.17 United States (Federal level) 168
Annex 1 References 178
Annex 2 Tables andFigures 183
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Glossary
Tertiary-type A Tertiary-type A programmes (ISCED 5A) are largely theory-based
programmes and are designed to provide sufficient qualifications for
entry to advanced research programmes and professions with high skill
requirements (such as medicine, dentistry or architecture). Tertiary-type
A programmes have a minimum cumulative theoretical duration (at
tertiary level) of three years full-time equivalent. These programmes are
not exclusively offered at universities and not all programmes nationally
recognised as university programmes fulfil the criteria to be classified as
tertiary-type A. Tertiary-type A programmes may also include second
degree programmes (such as masters level qualifications).
Tertiary-type B Tertiary-type B programmes (ISCED 5B) are typically shorter than those
of tertiary-type A and focus on practical, technical or occupational skills
for direct entry into the labour market, although some theoretical
foundations may be covered in the respective programmes. They have a
minimum duration of two years full-time equivalent at the tertiary level.
Up front/deferred Tuition fees may be up-front or deferred. An up-front fee implies that the
(Tuition fees) entire fee needs to be paid to the higher education institution in advance
of enrolment. Deferred fees are paid to the institution or state upon
graduation. There are relatively few examples of deferred fee regimes,
although the Scottish Graduate Contribution Scheme (prior to 2007) was
a good example. Systems that impose fees on students that are paid
initially by means of a loan, which are in turn repaid post graduation are
considered to be examples of up-front fee regimes.
Regulation Regulation generally refers to the involvement of the state in order to
produce an outcome in a market setting that might not otherwise occur.
In relation to the levying of tuition fees in higher education, regulation is
not simply the fact that tuition fees may be capped in some way, but
more generally refers to the process by which those institutions charging
a particular fee must ensure that access to university amongst
individuals less able to afford the tuition is maintained.
Loans Loans can in general be mortgage style or income contingent. A
mortgage style loan generally involves the repayment of an agreed
amount on a monthly basis (depending on whether the interest rate is
fixed or variable) until the entire principal and accumulated interest is
repaid. Income contingent loans are loans that incorporate the earnings
of the individual repaying the loan. In general, income contingent loans
are repaid at a given percentage of total or marginal income above a
certain threshold (although in some cases the repayment percentage
applies to total earnings upon reaching a threshold (Australia)).
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Interest rates Interest rates on loans can be denoted in either real terms or nominal
terms. The nominal interest rate equals the real interest rate plus an
adjustment for inflation. For instance, if inflation stands at 2%, a real
interest rate of 3% corresponds to a nominal interest rate of 5%.
Present value The present value is the value of a future payment or series of future
payments in today’s money terms. The present value of a stream of
payments in the future is calculated by discounting the future payments
by an interest rate (or discount rate). HM Treasury Green Book guidance
suggests that a discount rate of 3.5% per annum should be used for
periods of less than 30 years into the future.
RAB Charge The Resource Accounting and Budgeting charge (RAB) calculates the
proportion of the nominal loan value that would not be expected to be
repaid (in present value terms) – due to the interest subsidy and debt
forgiveness arrangements.
Rate of return The rate of return is the interest rate (or discount rate) for which the
present value of the benefits associated with qualification attainment
exactly equals the present value of the costs associated with
qualification attainment. For an individual, the benefits considered might
include the after tax enhanced earnings associated with qualification
attainment or the interest rate subsidies that might be available as a
student, while the costs might include the tuition fee for the course and
the opportunity cost associated with giving up 3-4 years of earnings in
the labour market.
Note: All currencies have been converted into British Pounds (£stg) using Bank of England
spot exchange rates as at 20th of November 2009 (Available from:
http://www.bankofengland.co.uk/statistics/index.htm)
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Executive Summary
Literature review: Tuition fees, student support and participation
University tuition fees have a negative impact on participation, and enrolment tends to be
lower in the presence of tuition fees. An increase in tuition fees tends to cause a decline
in participation, particularly among students from lower socioeconomic backgrounds,
unless accompanied by an equivalent increase in student support.
Recent evidence relating to reforms of tuition fees and student support in the UK found
that an increase in tuition fees by £1,000 per annum – holding all other factors constant –
would be expected to lead to a 4.4 percentage point decline in participation. In addition, it
was found that a £1,000 per annum increase in grants increases participation by 2.1
percentage points while a £1,000 per annum increase in loans is associated with a 3.2
percentage point increase in participation.
Tuition fees and other education related costs also influence the selection of higher
education institution, behaviour whilst at university and reduce the probability of
completion, especially for students from BME and lower socioeconomic backgrounds.
Provision of student aid (grants and bursaries), and increases in the level of student
support, have been found to enhance both participation and persistence (the probability of
completion) in higher education.
Studies of the impact of student loans on participation generally indicate no adverse
impact on participation of lower-income groups when an increase in tuition fees occurs
alongside enhanced loan and grant provision.
Summary description of differences in student support arrangements
Group 1: Countries with a high level of tuition fees and well developed student
support systems (England, Wales, Northern Ireland, Australia, Canada, New Zealand
and the United States)
The potential financial barrier to higher education participation of a high level of tuition
fees is mitigated by significant public subsidies provided to students by way of grants and
subsidised loans.
In the Group 1 countries, the average entry rate to Tertiary-type A programmes (71%) is
significantly above the OECD average (56%) and higher than most countries with
relatively low tuition fees.
There are significant variations in the full-time tuition fee levied across Group 1 countries
(between £1,722 and £19,592 per annum), which depend substantially on whether they
are set by the government or higher education institution.
All countries have means-tested non-repayable grants for full- and part-time study, but to
varying degrees of generosity in terms of availability and volume.
All countries offer student loans to full-time students for at least fees, but most offer
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maintenance loans too (both on a means-tested and non-means-tested basis). Unlike the
United Kingdom, other Group 1 countries also offer loans to part-time students.
Following a recent review of higher education funding, Australia appears to have the most
generous system of student support, followed by Wales, England, Northern Ireland and
New Zealand. Canada and the United States (both at the Federal level) have the least
generous systems with a high reliance on loans.
Group 2: Countries with no or low tuition fees but developed student support systems
(Scotland, Denmark, Sweden, Norway, Germany, France and the Netherlands)
In Group 2 countries, there are relatively low financial barriers to higher education
participation due to the low levels of tuition fees that are levied (less than £1,438 per
annum full-time) alongside relatively generous public subsidies.
A high proportion of the costs of higher education provision are resourced by the state (up
to 97%, compared to 65% in the United Kingdom as a whole and 34% in the United
States).
The average entry rate to tertiary-type A education (58%) is marginally above the OECD
average (56%), but lower than most high-fee countries in Group 1; however, a relatively
high proportion of secondary graduates enter high-quality vocational training (tertiary-type
B).
All countries offer grants, but whilst substantial grants are reserved for the poorest
students in France, all Danish and Swedish students receive statutory grants. Norway and
the Netherlands both operate performance-related loan-to-grant systems.
All countries also offer mortgage style student support loans to full-time students (except
Scotland) and some to part-time students, but credit is sometimes limited where grants
are high (Denmark).
Group 3: Countries with a low level of tuition fees and less developed student support
systems (Spain, Hungaryand the Republic of Ireland)
There are relatively low financial barriers for higher education participation due to either
no or low levels of tuition fees. However, this is combined with limited student support.
There is a relatively high state contribution (80% on average) to the cost of higher
education compared to the OECD average (73%) and Group 1 countries (53%). In
Ireland, the contribution of the state has increased over the last decade following the
abolition university tuition fees.
The average entry rate to Tertiary-type A education (50%) is significantly below the OECD
average (56%) and that of Group 1 and Group 2 countries.
Spain (full-time and part-time) and Ireland (full-time only) provide relatively generous
grants, but eligibility is tight, whereas Hungary provides modest grants to full-time
students.
Ireland offers no student loans whereas Spain offers short-term bridging finance to full-
time students. Hungary offers non-means-tested state-guaranteed full cost recovery loans
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to full-time and part-time students.
Group 4: Countries with high level of tuition fees but less developed student support
systems (None)
No countries in our sample of countries are in this group, which may otherwise contain
countries such as Japan and Korea.
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1 Introduction and Terms of Reference
1.1 Introduction and background
With the mass expansion of higher education, the resources available to higher education
institutions and students dropped dramatically resulting in significant issues relating to the
global competitiveness of UK universities. In Figure 1, we present information on the resource
available per student as the number of students entering higher education increased. There
was a general increase in per capita resource until the early 1970s followed by a decline
throughout the remainder of the 1970s and 1980s. Following the mass expansion of higher
education in 1992, per capita funding continued to fall. Even after the introduction of relatively
modest up-front fees in 1998, it was still the case that given the increasing proportion of
students in each cohort entering higher education, the per capita resource declined.
Figure 1:Universityfundingperfull-timestudentintheUK:1948-2009(2006/07constantprices)
11,000
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
Historicfundingperstudent(noprivatecontributions)
Historicfundingperstudent(incorporatingupfrontfees)
Historicfundingperstudent(incorporatingdifferentialfees)
Source:InstituteforFiscalStudies2005
There was an increasing belief that to guarantee the appropriate funding to maintain the
leading position of UK higher education institutions in a global context, additional resources
were required. Given the evidence of the substantial and continued economic returns to
higher education (for instance, Blundell et al. (2003)1, McIntosh (2004)2, Dearden et al.
(2005)3), it was accepted that the primary beneficiaries of higher education qualifications
(graduates) should contribute to HE funding. In addition, the evidence suggesting that the
1Blundell,R.,L.DeardenandB.Sianesi(2003)EstimatingtheReturnstoEducation:Models,MethodsandResults,IFSWorkingPaperNo.
WP03/20
2McIntosh,S.(2004)“FurtheranalysisoftheReturnstoAcademicandVocationalQualifications”,CentrefortheEconomicsofEducation
DiscussionPaper35
3Dearden,L.,L.McGranahanandB.Sianesi(2005)“Returnstoeducationtothemarginallearner:EvidencefromtheBritishCohortStudy
1970”,CentrefortheEconomicsofEducationDiscussionPaper45
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